After EdTech, AdTech the new favourite for investors?

Indian AdTech companies have secured over $450 million funds from venture capitalist firms over the last two years

e4m by Kanchan Srivastava
Published: Aug 22, 2022 8:38 AM  | 7 min read
investors

Bengaluru-based AdTech startup Zocket recently raised $3 million in a seed round of funding led by Kalaari Capital. Zocket, which helps businesses launch their digital ads in less than 30 seconds, had earlier raised $0.5 million in September last year.

Mumbai-based SaaS startup ProfitWheel, which focuses on creating a customer data-led marketing intelligence platform, secured $3 million in 2021 in its seed funding round. 

AdTech companies across the world have got a push from investors over the past two years. 

According to report by Tracxn, a Bengaluru-based data research company, out of 8,200-odd AdTech companies around the world, over 2,200 have received a whopping $21.8B investment in the last two years. This includes 630 companies from India. Among the top-funded Indian companies in CY2022 are Zocket ($3.4 million), ProfitWheel ($3 million), Jet Media Network ($2.5 million), Vioro ($2.15 million), Com Olho ($2,41000) and Moby ($217,800). Most of them were barely a few months to two year-old when they went for funding rounds. 

They largely operate in the domains like brand engagement,  marketing intelligence, targeted ads, ad frauds detection and encrypted governance among others. 

Indian AdTech space seems to be the new favourite among investors. The AdTech growth has come at the time when VCs have started dragging their feet from investing further in the Indian EduTech sector of late. 

This growth is being credited to the spurt in digital advertising that has taken centrestage during the pandemic, prompting the advertisers to look for better technological solutions to reach out to consumers. The rise of e-commerce platforms has also significantly contributed to the growth of the advertising technology industry in India, media experts say. 

Indian firms received $0.41 billion in 2 years

In the last two years, AdTech firms across the world have secured over $ 2.3 billion of investments in various rounds. Indian firms’ share in the investment is 2.1 percent, which corresponds to nearly $450 million. 

The US has got the lion’s share, 67.8% share of the total investment that flowed in the sector, followed by Chinese firms (13.4%). 

As per Tracxn, top investors in the sector in CY2021 include Singhal Family Charitable Foundation (invested in ProfitWheel), Mela Ventures (Voiro), Pivot Ventures (ProfitWheel), Modulor Capital (Botman). JITO Incubation and Innovation Foundation, IPV, Kalaari Capital, Kettleborough VC are listed as top investors in CY2022. 

Sensing the market growth, acquisitions and IPOs have also gone up. For instance, Nazara Technologies acquired a 55% stake in US-based Datawrkz. 

The fresh investment has primarily been directed towards product development and expansion of capabilities, as the digital advertising business increased leaps and bounds during the pandemic, sector experts say. 

For instance, Zocket plans to launch its full-fledged AdTech solution to small and midsize businesses with its raised capital. Zocket is also planning to take their solution to the global SMBs and capture a large chunk of the $700 billion markets and more global ad spend market.

It wasn't long ago that investors were pulling back from the ad tech industry, fearing it would crumble as the sector moved away from tracking cookies and toward privacy-focused targeting solutions.

“But optimism surrounding the country's economic recovery, inflated public market valuations and growth in streaming, gaming and e-commerce has investors much more excited about AdTech today than ever before,” industry experts say. 

How experts look at it

Paras Mehta, Head of Matterkind (India), says, “Data privacy laws leading to a sharp focus on collection, unification, enrichment, and activation of first-party data, alternate audience data sources to address the need when Google deprecates 3rd party cookies tracking, the need for delivering personalized communication at scale and increase in productized use of AI/ ML for various activities such as sharper audience identification, auto-optimization etc are a few important areas where everyone has their eyes on.”

“Not to mention the ever-increasing need for technologies related to Digital Transformation and MarTech are an additional bunch who are not shying away from capturing the attention of not only CMOs and CIOs but also VCs,” Mehta added.

Shares Lloyd Mathias, a business strategist & an angel investor, “Nearly 80 per cent of India’s digital advertising is spent on big tech platforms though Indian consumers are spending 70% of their time on the open internet – outside of these platforms. Brands are now working on how AdTech will fit into their existing media buying and also keep watch on the ever growing ad fraud.”

“Creative AdTech is on the cusp of a revolution, especially with the advertising world going through shifts in privacy policies, Llyod said, adding, “Between new regulations and the depletion of third-party cookies, there is a renewed direction towards investor interests and relations. Identity solutions and measurement tools have attracted billions of fundings to create solutions for effective and efficient campaign management and measurement.”

Dimpy Yadav, General Manager of Xaxis, lauds AdTech firms’ innovative solutions and mechanics. 

“The ecosystem is thriving on customer-centric and performance-based marketing techniques. Brands and advertisers are turning towards campaigns that provide real-time customer engagement directed to their target audience. In order to achieve the desired results, the AdTech industry has spent a considerable amount on digital advertising mechanics and solutions such as marketing clouds, DMPs, and CDPs to keep track of customer data and interactions,” Yadav noted.

“They are developing machine-based algorithms incorporating artificial intelligence and machine learning in order to reach the goal of instant optimization. Especially in India where the growth of digital technology and virtual reality is exponential across many business verticals, AdTech companies can leverage on the availability of solutions in order to improve their services,” Yadav added. 

According to Rahul Vengalil, Executive Director of Everest, a Rediffusion group company, AdTech business in India could touch Rs 15,000 crores in the next three years. 

“Globally, 66 per cent of the ad spend is going into digital advertising. In India, digital is set to overtake TV this year and is likely to acquire 50 per cent share in the total ad spend in the next three years. By that time, India's total ad spend is likely to cross rupees one lakh crores which means digital will get Rs 50,000 crores. While 70 percent of this will go to the likes of tech giants Google, FB and Amazon, the rest that is Rs 15,000 crores will go to the other tech platforms which will need a tech boost from Ad Tech firms. You can understand the scope and scale of Ad tech firms in the coming days.”

Vengalil says that the ad tech firms usually charge 10% of the deals which essentially means they are likely to be a Rs 1,500 crores industry in the next three years. 

Naman Surana, National Business Director of FoxyMoron, a Zoo Media company, gives credit to rising digital ad spend in India to a renewed focus on customer engagement. 

“Digital advertising spend in India jumped 35 per cent to reach Rs 21,353 crore by the end of 2021, compared to Rs 15,782 crore in 2020. Recent reports projected that digital advertising spending will reach Rs 35,809 crore by the end of 2023. This tells you the value and volume by which India's digital advertising is growing. This gives opportunities to Adtech companies to provide better customer experience management and intelligent automation that is leading to accelerated growth and investment in this space,” Surana said.

Both AdTech and the digital ad business are here to grow in this decade for sure, he said. 

Mukul Kumar - Co-Founder & President, Engineering - PubMatic, says that as media budgets continue to shift into digital, and into programmatic, the opportunity for our customers is huge. According to Data Bridge Market Research analyses, the programmatic display advertising market was valued at USD 451.48 billion in 2021 and is expected to reach the value of USD 5252.84 billion by 2029, at a CAGR of 35.9% during the forecast period of 2022 to 2029.

In the future, all advertising will become digital, and all digital advertising will become programmatic, which simply means applying automation and data.  Programmatic advertising creates better outcomes for consumers, publishers, and advertisers.

Besides, advertisers prefer the professional, brand safe content of the Open Internet to the user generated content of the walled gardens, giving us a significant opportunity to grow our business. 

Long-term success in digital advertising enablement requires low cost infrastructure. Every individual ad impression must be processed in real time, and generates significant amounts of data.  By controlling all layers of our infrastructure stack, including network, hardware, and software, we can operate more efficiently and create better outcomes for our customers.  

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